GBP EUR Slides as Political Tensions on Brexit Escalate

GBP EUR Slides as Political Tensions on Brexit Escalate

The pound is still trading at the lower levels in this recent weaker range ahead of the important Brexit cabinet meeting at Chequers tomorrow. New details have emerged today of the new “facilitated customs arrangement” whereby technology would be used to determine when and where tariffs would be imposed. The political uncertainty over Brexit continues after this morning’s announcements and after Jaguar Land Rover threatened to leave the UK and this is resulting in sterling weakness.

The pressure is now being ramped up on the government ahead of this crucial meeting tomorrow which should give new direction to Brexit and also in my view the pound. Leaked reports are pointing towards a softer Brexit which could be seen as positive for sterling although it remains to be seen whether this will be workable within her cabinet and also if it seen as credible by the EU. Clients with pending requirements to either buy or sell Euros would be very wise to plan ahead of tomorrows events as there is likely to be considerable volatility on the back of it.

Bank of England governor Mark Carney will be speaking today and could offer some insight as to when that next interest rate will take place. There has been noise that the next rate increase is now more likely to take place in August rather than November. Any commentary from the Bank of England that helps support this view would be seen as positive for the pound.

European Central Bank member Yves Mersch will also be speaking today and could offer some more clues as to the future path for the central bank. Any comments are unlikely to create too much volatility though considering the ECB has only recently come out with some very big decisions in terms of concluding its asset purchasing scheme by the end of this year. The central bank has also indicated that interest rates will almost certainly not rise by December 2019.

UK and EU economic data for the rest of the week is light so we are focussing on political developments to be the biggest driver to close the week.

For more information on how these events are having a direct impact on the price of sterling against the Euro and how to time your exchange at the best levels then please make contact with me at jll@currencies.co.uk